The Organization of Petroleum Exporting Countries is committed to production of about 31.5 million barrels a day, Nigeria’s Minister of State for Petroleum Resources and OPEC President Emmanuel Ibe Kachikwu said in Vienna after the group’s meeting.
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But Riyadh and its Gulf allies appeared on Friday to be ready to stick to their strategy of defending market share, hoping that lower prices would ultimately drive higher cost producers, such as USA shale oil firms, out of business.
The oil cartel announced Friday that it was postponing its decision on the production quota until its next meeting in June, and said it will instead continue to produce at its actual level, instead of the official level of 30 million barrels per day.
OPEC oil ministers have effectively scrapped their official output ceiling and agreed to keep producing above that level.
Having reviewed the oil market outlook for 2015, and the projections for 2016, the Conference observed that global economic growth is now at 3.1% in 2015 and is forecast to expand by 3.4% next year.
He disclosed that world oil demand this year grew by 1.5 million barrels per day, up from 1 million barrels per day last year. The number of active oil rigs in the nation fell to 545, the least in five years, Baker Hughes Inc. said on its website Friday.
“By then they have a better feel for Iranian production; how much damage has been done to shale production; and how many offshore and oil sands projects have been delayed or scrapped”, Williams said.
Before the meeting, industry analysts told the Washington Examiner that the cartel could decide to keep prices low after seeing the effect its decision past year to not cut oil production, in the face of a price collapse, had on the American energy sector.
Brent crude oil, in a particularly volatile morning, was off roughly 2 percent to start trading in NY at $42.93 per barrel.
The increase from a previous target of 30 million barrels doesn’t include production from Indonesia, which joined the group after a break of nearly seven years, according to a delegate with knowledge of the matter, who asked not to be identified because the decision hasn’t been made public.
“While oil advanced for the second day ahead of the OPEC meeting, there is really nothing much to cheer about”, said Bernard Aw, market strategist at IG Markets in Singapore.
In other words, OPEC has been content to play chicken with U.S. producers. “U.S. production is going down while Iranian production should be increasing”.
Prior to OPEC’s meeting, Iran’s oil minister Bijan Zangeneh was reported to have said that negotiations with Iran not to increase its output were out of the question. “We have to accommodate Iran one way or the other”.
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“We expect OPEC will likely maintain its production ceiling at the current level or adjust it upward slightly to reflect Indonesia’s re-joining the group while maintaining the goal of retaining market share in general”, said oil consultancy Wood Mackenzie Ltd.
